High Balance Conforming Loans Explained In A New Guide

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LoanLove.com’s new loan terminology guide helps borrowers understand the difference between conforming and conventional loans.

LoanLove.com is a borrower advice website that helps borrowers to understand their mortgage options in a fun and entertaining way. The website provides a number of articles and guides that both first time home buyers and experienced home owners can benefit from. Their large selection of valuable resources, first class knowledge and connections to top rated industry professionals has helped the website to fulfill its mission – to help borrowers find a loan that they will love by providing the latest information on mortgage lending trends, the real estate market and the U.S. financial landscape. The website’s newest resource is a loan terminology guide titled “Coming to Terms: Understand Conventional vs. Conforming Loan Types”. In this article, borrowers can learn about high balance conforming loans and how they differ from regular conforming loans and conventional loans.

The new article states: “Maneuvering the maze of finances involved in the loan application process is tough enough without someone throwing a vocabulary quiz at you. Unfortunately, the terms tossed your way as you consider financing options for the home of your dreams can start to all sound alike. Worse yet, it is not unusual for the media, websites or even real estate professionals to confuse the issue further by using terms interchangeably, like conventional vs. conforming loans, that aren’t actually synonymous.”

The article goes on to give a mortgage term “cheat sheet” which can help borrowers to understand the difference between some of the more common mortgage terms.

It starts off by defining the terms Fannie Mae and Freddie Mac. While these terms are often heard when talking about mortgages, there are still many who do not actually understand what they mean. Fannie Mae and Freddie Mac are actually nicknames used to talk about the Federal National Mortgage Association and the Federal Home Loan Mortgage Company, respectively. These are both publicly traded entities with government sponsoring. They buy loans that lenders have made to home buyers in what is known as the secondary market. This frees up additional funds from banks, which increases the availability and affordability of loans to low to moderate income home buyers. While both entities are nearly identical, they differ when it comes to the types of banks they work with and the limits they set on the loan amounts they back.

VA and FHA loans are also often confused. While both loan programs offer great benefits to those who qualify for them, they are actually completely different from each other. VA loans are loans that are available for military veterans. The Department of Veterans Affairs does not actually make loans, but they establish rules that govern how other lenders make VA loans. FHA loans are insured by the government against default. The Federal Housing Administration does not actually make the loans (as with the VA), but sets the guidelines for qualifying FHA lenders. Because of these loans are insured, either by the VA or FHA, lenders can give borrowers the option of either no down payment (with a VA loan) or a very low down payment (FHA loans often require only 3.5% down payment).

Lastly, the article explains the difference between conforming and conventional loans. It explains that conforming loans are those that conform to the limits set by Fannie Mae and Freddie Mac. Nonconforming loans are those that exceed these limits or do not meet the funding criteria – so called “jumbo” mortgages fall into this category. Conventional loans are simply loans that are not government insured. They may meet the conforming guidelines, but without the government backing they are still “conventional”. So, by definition, a conventional loan may also be conforming, but not all conforming loans are conventional loans.

To find out more about the different loan terms, please visit LoanLove.com.

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Kevin Blue
Loan Love
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